Walmart keeps the door open for India retail play
NAYANIMA BASU
New Delhi, 10 October
American retail major Walmart has snapped ties with Indian partner
Bharti but its plans to enter the country's multi- brand retail space
appears intact. The company has urged the Department of Industrial
Policy and Promotion (DIPP) to allow entry of private label suppliers
as part of 30 per cent mandatory sourcing norms.
It has asked DIPP to amend the mandatory sourcing clause to introduce
the concept of private- labelling.
This, if allowed, would help the US retail behemoth bring in some of
its international private labels that are keen to enter the fast-
paced Indian retail market.
Walmart, which announced its break- up with Bharti on Wednesday, has
sent to DIPP a detailed plan on the way it wants its private label
suppliers to operate in India.
"They ( Walmart) have suggested private labelling to be inducted in
the sourcing clause. We are examining it and trying to understand the
concept," asenior DIPP official told
Business Standard.
He said DIPP was trying to comprehend whether sourcing would be done
from foreign markets or from India before taking a call on the issue.
Through its partnership with Bharti Retail, Walmart had brought in
seven private labels — Great Value, Equate, Hometrends, George,
Astitva, Mainstays and Simply Basic — offering adiverse mix of
products in India at Easyday supermarket chain.
Private labels, popularly known as store brands, are owned by the
retailers and sold at lower prices within their own outlets. Big
retailers are able to sell these at lower prices, unaffected by margin
worries, as the cost of marketing and advertising of these private
labels is nominal.
Indian retail biggies, such as Future Group and Reliance Retail, also
rely on private labels to push their sales.
Even as the government has relaxed entry norms for foreign multibrand
retailers, Walmart has expressed its discontent over some of the
conditions the policy lays out. Under pressure from international
players, the government further eased the norms on some of the riders,
especially the one related to the mandatory sourcing clause.
"They still have problems with the sourcing norm. We are trying to
analyse what they are seeking," the official said.
According to the extant policy, foreign retailers can open outlets in
the country on the condition that 30 per cent of their sourced sales
would come from small to medium- sized domestic producers in India.
However, the definition of small sector has been expanded to include
units with total investments of up to $2 million in plant and
machinery (instead of $ 1 million earlier).
Walmart now wants to get this norm amended to fit in its private label
suppliers.
Seeks entry of private- label suppliers as part of 30% sourcing norms
STICKING POINT
The mandatory MSME sourcing norm
>Up to 51% FDI allowed
in multi- brand retail on the condition that at least 30% of
requirements will be sourced from Indian micro, small and medium
enterprises >To attract FDI, the norm was eased by redefining the MSME
sector to include units with total investments of up to $ 2 million in
plant and machinery ( instead of $ 1 million earlier)
>Still wary of the sourcing
norm, Walmart has been seeking further relaxation
--
CS A Rengarajan
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